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Eurozone cloud over London office revival

Construction volumes in the London office market have trebled since the slump of 2008, Drivers Jonas Deloitte’s latest Office Crane Survey has found.

Growth has been strong with a 28 per cent rise in office space under construction to 9.2 million square feet over the past six months, equivalent to a 44 per cent rise on the position a year ago.

But the report has warned that the resurgence of the eurozone crisis could hit the confidence that made a tentative return among developers in the early part of this year.

The report said new building had spread beyond the capital’s West End to Kings Cross and Docklands for the first time in 18 months.

DJD head of research Anthony Duggan said: “Developers feel that the low levels of construction, compared to historic trend, and lower building costs are compelling [for investment].”

Mr Duggan said the halting of work on Arab Investments’ one million sqft Pinnacle skyscraper (pictured) was an exception to an otherwise active market.

“It is quite rare for a building to stop like the Pinnacle has but there have been 13 new starts that together are not far off that [one million sq ft] total,” he said.

He added: “There has been very low activity for the last couple of years, so there is tenant demand.

“We saw an increase in confidence at the start of the year but the resurgence of the eurozone crisis can knock things back, but long-term there is demand and a lack of supply.”

The survey also found that refurbishments accounted for 22 per cent of construction activity.

Despite industry fears over the potential for the London 2012 Olympic Games to disrupt construction work, Mr Duggan doubted that the delays would be significant.He said: “Building projects are large and complex beasts, so they will be well planned around any issues arising from the Olympics and I doubt we will see any surprises.”

DJD predicted that 2013 would see 2.9 million sq ft of available office space, with an average of 2.3 million sq ft expected annually to 2016.

The survey found space under construction in the City of London was up by 13 per cent compared with six months ago, totalling 3.5m million sq ft, while in the West End 2.7 million sq ft of space was under construction, a rise of 27 per cent over  a year.

Completion of the Shard would be “set to give a dramatic boost to the South Bank office market”, it said.

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